Cleveland Fed President Comments On Interest Rates And Economic Resilience

According to Odaily, Cleveland Federal Reserve President Loretta Mester, a known hawkish official, stated that current interest rates are not yet significantly restrictive and should remain stable for some time. She suggested that the U.S. might be nearing a neutral economic environment. Mester expressed confidence in the long-term resilience of the U.S. economy, which she believes will adapt to higher interest rates. Despite the broadly loose financial conditions and high stock market valuations, with equity risk premiums close to zero, her remarks contrast with those of Federal Reserve Chair Jerome Powell. Last month, Powell indicated that interest rates remain substantially restrictive following last year's rate cuts. Mester emphasized the importance of a patient approach, allowing time to monitor the labor market, inflation trends, and the overall economic performance under the current interest rate environment. She highlighted the need to track inflation expectations and other indicators to assess whether financial conditions align with the Federal Reserve's anti-inflation efforts. Following her comments, U.S. stock markets extended their losses, with the Nasdaq Composite Index falling over 2.3% by the end of the trading session. Mester is set to be a voting member of the Federal Open Market Committee (FOMC) next year.